Beena Parmar Moneycontrol News
Union Bank of India is in the process of raising Rs 2,000 crore from the market with some additional infusion of Rs 1500 crore from the government to strengthen its capital base.
"We are in the process to raise about Rs 2,000 crore in the next 3-4 months...but aim to raise it by October 15," a senior executive at Union Bank of India told Moneycontrol.
"Right now we are just finalising 4-5 merchant bankers and would be raising it most likely through QIP (qualified institutional placement)," the official added.
The merchant bankers are also likely to explore other options to raise capital including rights issue and follow-on public offering.
The public sector lender has also asked for capital infusion of Rs 1,500 crore from the government, which it expected to come in by this month-end.
"We also have some cushion from LIC (Life Insurance Corporation) which has 10 percent right now. So there is room for five percent more. We are talking to them as well," the executive quoted above said.
Union Bank's capital adequacy ratio (CAR) was at 12.01 percent with tier 1 of 9.24 percent at end of June 30, 2017. Its CAR was 10.75 percent with tier 1 of 8.39 percent at end of June 2016.
Banks are shoring up their capital base ahead of the consolidation process to strengthen their merger prospects and meet the Basel 3 capital norms required by 2019.
The executive said that since the share prices have been beaten down, they do not plan to raise a huge amount. "But we need the money this year for growth and also to strengthen our capital base."
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